German big Volkswagen on Thursday reported a drop in first-quarter revenue, saying weaker gross sales in China reaffirms the necessity for the carmaker to shut the hole on its rivals within the nation’s fast-growing electrical automobile market.

Volkswagen mentioned working revenue fell 31% to five.7 billion euros ($6.3 billion) by way of the primary three months of 2023, down from 8.3 billion euros over the identical interval final 12 months.

Europe’s largest carmaker mentioned working revenue earlier than valuation results from commodity hedging, nevertheless, elevated by 35% to 7.1 billion euros.

First-quarter gross sales income rose by 22% to 76 billion euros, Volkswagen mentioned, primarily pushed by a restoration in gross sales volumes in Europe and North America.

“We had certainly a very encouraging begin into the 12 months 2023, with each revenues and underlying working revenue enhancing considerably,” Volkswagen Chief Monetary Officer Arno Antlitz advised CNBC’s Annette Weisbach on Thursday.

“As you bear in mind after we launched our targets for 2023, they had been fairly bold, we acquired this suggestions, however primarily based on that very strong first quarter and primarily based on an order backlog of 1.8 million automobiles in Europe, we’re fairly assured that we are going to obtain all our monetary targets for 2023.”

Shares of Volkswagen had been marginally increased on Thursday morning. The inventory worth is up roughly 5.5% year-to-date.

Volkswagen mentioned deliveries in China slipped 14.5% by way of the primary three months of 2023 but it surely stays assured gross sales will recuperate by way of the rest of the 12 months, citing an expanded mannequin vary and China-specific expertise.

Requested concerning the sliding first-quarter gross sales in China, Volkswagen’s replied Antlitz, “We had a gradual begin in China.”

He added it was necessary to differentiate between China’s combustion engine market, the place Volkswagen has lengthy been a frontrunner, and the nation’s battery electrical automobile (BEV) market, the place it needs to meet up with rivals together with Chinese language EV big BYD.

“I simply got here again from Shanghai, I spent there three days taking a look at competitor automobiles, speaking to the groups on the bottom and it is apparent we have to velocity up, specifically on the BEV aspect,” Antlitz mentioned.

“I am assured that we are going to play a significant position in China additionally sooner or later,” he added.